Pages

Wednesday, December 13, 2006

There sure is a lot of buzz going on these days about airline mergers and 'consolidation' within the industry. The pot has been stirred by public statements from United Airlines CEO Glenn Tilton.

He was quoted in a Reuters article on Airwise.com:

"We think it is good and overdue for the industry despite the fact that it is difficult," Glenn Tilton said on a webcast of a UAL investors meeting.

"We are not in position to comment on anything specifically," Tilton said, adding that the airline is attentive to merger opportunities.

It has been widely rumored that United and Continental Airlines will merge in the near future.

More on the rising tide of 'merger mania,' also from Reuters:

The subject of airline mergers is very much on the agenda following last month's unsolicited bid for Delta by US Airways. Some experts believe US Airways' bid will trigger a wave of consolidation.

Just last week, Northwest Airlines, which also is restructuring in bankruptcy, asked for court permission to hire a financial adviser to help it evaluate strategic alternatives that could include a merger.

Northwest told employees in an internal posting that its interest in hiring an adviser does not mean that the company is considering a merger.

The airline industry has been weakened in recent years by low-fare competition and soaring fuel prices. Many experts say the key to prosperity for airlines is to cut capacity in order to gain more leverage over fares.

Airline mergers can result in capacity reductions where the routes and services of merging airlines overlap.

In the face of all this, the big issue for airline employees is employment stability. Mergers and acquisitions invariably result in the loss of jobs for some. For those who keep their jobs, the issues will be retention of seniority, and which labor contract provisions will prevail.